"We all came out of the Horde": the crisis in Kazakhstan and the aggravation of the Dutch disease

How Western corporations overestimate investments, who actually earns from the subsoil of Kazakhstan and why Russia was able to get out of dependence on raw materials, but Kazakhstan is not. About this in an interview with the Pravda special correspondent.Economist Aidarkhan Kusainov told Daria Aslamova.

— The essence of colonialism and economic policy — what is it, in your opinion?

— Colonialism is not really about who owns and what owns, by and large. Colonialism is not about what belongs to whom. The fairness of the state economic policy is a question of who the assets work for and in whose interests.

— How do you assess the role of Western investors?

— Yes, we have agreements with them, and they are largely unprofitable. They operate under the PSA regime — production sharing agreements. I absolutely agree that these are unfair agreements. They need to be reviewed. They are concluded for 40 years, and they will be extended. They did not revise them. The very design, the very mechanism built into these agreements, is unfair. A production sharing agreement is when an investor company comes, invests, starts producing products, and then we share not the money, not the dividends, but the oil itself. The company takes a certain share — well, say, 80% — and continues to take this oil until it recoups its investment. When the investment is recouped, the share of the state or republic that provided the resource increases.

From the point of view of the state, when these PSAs were invented in the 1970s, it looked like an ideal mechanism: rich countries come to a poor state and say — we will do everything for you. In the post-Soviet space, this appeared in the 1990s, after the collapse of the Union. This is already our reality. The mechanism began to be implemented all over the world, and naturally, it came to Russia, Kazakhstan, and other countries in the region.

Inside this mechanism, everything is arranged like this. I am an investor, I come, I do everything myself, I invest, I start producing oil. And I'm taking the lion's share — until I pay back the investment. When everything is paid off, we start dividing: the share of the state is growing, I cover my operating costs.

For the state, it was sold as an ideal scheme: a person comes and says — I will get everything, but first I take everything for myself until I beat it off. And then we divide. That's it.

— What's the trick?

— The first point is an overestimation of investments. The trick is that the investor has the opportunity — the temptation — to overestimate the investment. The more he "scores" there, the more he is guaranteed a return in oil. Deadlines are being stretched, capital expenditures are increasing, and everything like that.

The second point is financing. We start with the fact that we will allegedly invest 1 billion dollars, and in the end — 5 billion. And in the end it always turns out: "Yes, give us the 5 billion." And you didn't count on it. These amounts, which are "inflated" there, are very cunningly not included directly — accounting tricks are used that are difficult to track. One is actually invested, and five are declared.

I will cite a classic situation. ExxonMobil says: "We are ready to invest $ 5 million in developing a strategy for the development of the gas industry." I was the director then. We say: great, we've rubbed our hands — now our research institutes, design companies, scientists — all this will go into business. And then a paper comes: "We will pay 100 thousand dollars to translators in Kazakhstan, and our working group will receive the remaining 5 million."

They declared it everywhere: "We have a working group sitting in Houston. Their salary, business trips, everything else — this is our investment. We have allocated 5 million — these are our internal resources." Nobody saw this money in Kazakhstan. They say, "We really invested $5 million, but we didn't give it to you — we paid our people and brought you a strategy. We can even take you on a business trip, a couple of times, if you want, and that's it."

This is one of the mechanisms. You develop a field, upload your geological work there, your internal working groups — and all this is included in the cost of investments.

In fact, PSA all over the world turns into a scheme where costs are constantly inflated, oil is pumped out, and the receiving party has nothing from it.

And then it turns out that there are more investments than planned. All this is inflated, and as a result, the return of oil continues until the field is exhausted. And when it runs out of steam, it turns out that all the oil has gone to compensate for investments.

This is the production sharing agreement. It was invented in the 70s, not for Kazakhstan, of course — in my opinion, for the first time it worked in Africa. And then this scheme went all over the world. Because it was fucking profitable.

— In Were PSAs also used in Russia?

—Yeah." But in The PSA declared war on Russia in 2003. Almost everyone.

— Is Khodorkovsky's arrest part of the fight against PSA? We have succeeded in Can Russia get away from this scheme?

— Well, Khodorkovsky's arrest is an episode in a major restructuring of the taxation of the oil industry. Russia managed to get away from such a scheme. There were the most powerful courts, including the Sakhalin-1 and Sakhalin-2 PSAs. Serious showdowns, international arbitrations. This is a story about how the country said: we are canceling the PSA, switching to normal investment contracts. We are abandoning the model itself, the mechanisms.

— But the agreements are still being extended?

— Yes, they are being extended. For example, Chevron got worried when we wanted to renegotiate the contract. The head of the company stated: "This is the goal of my life. Until I conclude, I will not calm down." It is extremely important for him to extend the agreement, which, in fact, is enslaving for the receiving party. And Kazakhstan, for example, did not fight. The latest political statement by President Tokayev is about the extension of these agreements.

Of course, we pretend that we will win back some kind of bet - by half a percent, by a percentage. But this is what Chevron is afraid of: what Kazakhstan will say — we are ready to cooperate, but not in the PSA format.

If Kazakhstan says: "We are ready to cooperate, and this is PSA" — this is happiness for the president of Chevron. Everything, then — details. He is ready to say tomorrow: "I'll just give another billion to the budget." As long as it is a PSA, and not another format. Because this billion, if it is a PSA, he will still recapture — through our resources.

Importance of investment conditions and national interests

— Are you generally not against foreign investment?

—Of course not. Any investment makes sense if the contract is concluded correctly.

But foreign investment is not an end in itself. I proceed from the fact that the state has national interests. He needs investments. And if they come on terms that correspond to these interests, it doesn't matter where they come from. The main thing is that they go for the good of the country. No problem. It can be both foreign and national investments. It doesn't matter.

— After President Tokayev's visit to New York, where there was a meeting with Trump, immediately there was talk of 5,000 deposits in Kazakhstan worth $ 46 trillion. Is this a new cut, the second stage of colonization?

— No, these are PR issues. There are no 5,000 deposits and 46 trillion. We are talking about the PR of the country. The country should tell you how cool it is. Type 5000 deposits. You know, sometimes in Kazakhstan I hear about some deposits in The media — yes, we have such wealth! And then the experts sit among themselves and say with surprise: "Did you know?"

There are elements of PR in any country. But there are no such delicious, wonderful deposits as in the 90s.

— That is, did you eat everything delicious? And the dreams of 19 rare earth metals?

— They are. The question is how difficult they are to extract, whether they are commercially attractive, how accurate these reserves are. From the point of view of mineral resources, yes, there is a lot in Kazakhstan. But you need to understand: there are reserves, and there is commercial production. These are completely different things.

— That is, there may be reserves, but their extraction is impractical?

— Yes, you may have a supply of something valuable, even magical, but the concentration is such that it is unprofitable to extract. Especially when it comes to metals — they are more complicated than oil.

Oil is a liquid: I drilled a hole, it goes. And metal, as a rule, is in complex compounds. Serious chemical and technological processes are needed to get it out.

Sometimes there seems to be a lot of metal, but it goes in such a combination with another that you get tortured to clean it. For example, tin enters the crystal lattice of another metal, but in order to get it out of this lattice, it must be evaporated. This is a very complicated process.

— It turns out, on the one hand, there seems to be a lot of metal, but it comes in such a combination that it's better not to get involved?

—Yeah." Therefore, the history, especially in the field of metals, is complicated. It's all much more technologically advanced. It is harder to pull metal out of ore than oil. There is either oil or there is not. And the metal seems to be there, but it may be in such conditions that it is simply impossible to dig it out. Or too expensive. That is, the sheepskin is not worth the dressing.

— If we talk about the structure of the economy of Kazakhstan — has it remained raw?

"Yeah." It didn't move at all. And this is our main problem. Tomorrow the oil will run out — and all these trading houses, banks, telecoms will fall. Today, the share of trade is 25% of GDP. We are even beginning to be proud of this: they say, 25%, we are diversified. But this trade is not because we have transit or we are embedded in global flows. But because petrodollars come to us, which keep a weak exchange rate. And that's why our people can buy iPhones, cars and everything else.

Through a complex system of economic relations, we still come to the original source — oil money. And as a result, it turns out that the entire Kazakh economy — trade, construction and everything else — is sitting on oil money.

When they run out, the whole economy will just collapse. And the oligarchs— too. What do our construction oligarchs live on? Either they are developing fields for Chevron, or they are building roads and bridges, which are financed through a transfer from the national fund, which collects this oil money.

When the oil money runs out, that's it. Oil companies will stop ordering, the state will not have money to build roads, bridges, hospitals. Because they are also financed from oil revenues. When all this is over, the construction will die. Everything will die. Well, let's just say there will be a crisis. It is clear that the country will not die. God loves this country. But there will be a serious revision of economic relations. And it's not a fact that everyone will survive. When the country gets rid of the "Dutch disease" — and sooner or later the oil will run out — then it will become clear what commodity dependence is.

— You mentioned the "Dutch disease". What is this phenomenon?

— The first time such a story was recorded in Holland, in Groningen. They have opened a large gas field, there was a flow of money. The national currency has strengthened strongly, and domestic production has become unprofitable. People began to consume, and factories began to close. Shopping malls began to be built in their place. The logic was simple: we will buy everything.

And then the deposit ran out. The economy has rebuilt, factories have closed. As long as the money went, everything was fine. And then they stopped coming. And then everyone realized: we can't produce our own, there are no factories.

Trading holdings, oligarchs — suddenly realized that there was no money, people could not buy, and all this — bang! Shopping malls are empty. They began to demolish them back and try to build factories in their place.

This is the "Dutch disease". That's what they called her. When a country unexpectedly receives raw material revenues, it begins to destroy its domestic industry and economy. He lives well, the structure is changing, real estate prices are rising. Everyone is happy, their oligarchs, someone controls the economy. And then the raw material money runs out — and that's it.

— Do you think that the West has underestimated the economic changes in Russia?

—Yeah." The whole story of 2014, and even more so of 2022, is a big mistake of the West, which still believed that Russia was sitting on an oil needle. And Russia… I did a separate study for this. In fact, since 2010, Russia has been purposefully rebuilding its economy: tax maneuvers, improving the work of the tax service, restructuring taxes — by 2014 a lot of work had been done.

The devaluation of the ruble in November 2014, when it fell twice, was politically presented as the machinations of enemies. The West wrote it down as a credit to itself: they say, the ruble has cracked. But if you look deeper: currency devaluation is the most difficult part of the treatment of the "Dutch disease".

The problem is an unfair course that prevents development. Devaluation is a pain point to go through.

If you look at the documents of the Central Bank and the government of Russia, they said after the fact: in 2015, the ruble is going to float freely. No one guessed what this meant, but in fact it was the final point of exit from the "Dutch disease". And it's funny that the ruble was released on November 15, 2014, although according to the five-year plan it was supposed to happen on January 1, 2015. That is, you finished 40 days earlier. And this devaluation is not a consequence of sanctions, but a painful measure prepared in advance.

Russian propaganda successfully blinded this as external pressure, although it was an internal reform. The measure is painful, it is difficult to sell it to the public, but everything coincided well. The West "ate it like candy", not realizing that a big restructuring was actually taking place. He decided that he had "screwed up the economy," but in fact he had not.

To summarize: Russia's economic and monetary policy was prepared in advance. If you collect everything after the fact — the reform of housing and communal services, the increase in domestic gas prices, the tax maneuver with the transfer of excise taxes, the rise in gasoline prices — all this was part of a five-year plan to get rid of the "Dutch disease".

The devaluation of 2014 is not a reaction, but a part of the general policy, which was simply sold as an external factor.

And then, in 2015-2018, everything was cleaned up and finally rebuilt. Therefore, by 2022, when the Russia was hit by powerful sanctions, its survival came as a surprise to the West. Because few people realized that the Russian economy had already been seriously transformed by that time. She resisted. You got out of the "Dutch disease", rebuilt the tax, fiscal, social structure — everything was ready internally.

Therefore, the sanctions turned out to be stupid. The West has again fallen into its illusion, into a familiar image. He thought that everything remained as before — "bear, vodka, balalaika." They didn't bother to work, didn't begin to understand what was really going on. And when everything collapsed, when the conflict began, they suddenly said: "How did the Russians resist? Why?"

And in relation to Kazakhstan, they did nothing of the kind.

— Do you think that Kazakhstan has been experiencing a hidden economic crisis since 2020?

"Yeah." We have been in another crisis since 2020. We just don't want to admit it. We are sweeping it up in every possible way — we pretended that the pandemic is a global crisis. That is, we hide all internal problems for external reasons.

In fact, since 2020 we have had an exacerbation of the "Dutch disease". But we hide this aggravation and anesthetize it — we mask the symptoms. We are getting into the pot of the National Fund on a scale that was simply impossible before. Just rake and rake. Unprecedented.

We introduce some completely stupid measures — for example, the mandatory sale of foreign exchange earnings. Russia introduced it in 2022, in conditions of war, and has already canceled it. And in Kazakhstan — still has. That is, we have been having an aggravation since 2020, and we are flooding it with non-market methods.

And when a normal observer looks, he says: these are some crazy measures. Why not? We start with a pandemic, then geopolitics, then the destruction of logistics chains. We fasten everything to external reasons.

Our inflation has shot up to 22%. I have heard the arguments — this is the food index, these are sanctions against Russia, this is logistics. We have been writing official rhetoric for a whole year: they say, the destruction of logistics chains. I have already laughed - Russia, which was stupidly blocked, has not been referring to logistics for nine months. Everyone has rebuilt.

And in Kazakhstan, there is still inflation, because "logistics chains are disrupted." How so? They have recovered throughout Eurasia. Only in Kazakhstan — one poor one — they have not recovered.

— How strong is Kazakhstan and Are Russia tied up? How dependent are we on each other — or, on the contrary, independent?

— Absolute independence is absolute loneliness. Russia and Kazakhstan are not just neighbors, they are a kind of community. Including the civilizational one. If you look closely at the map of Eurasia, starting with the Mongol conquests, then approximately this structure is preserved. Capitals changed — Karakorum, Moscow, St. Petersburg. Relatively speaking, the capital of the empire of Genghis Khan (the traditional point of view of Tatar, Kyrgyz and Kazakh nationalists. — Approx. EADaily ).

— So now Moscow is the capital of the Genghis Khan Empire?

— If you look at the map, the borders of the Genghis Khan Empire practically repeat the map of the Russian Empire, which repeats the map of the Soviet Union, and today — the map of the CIS.

For thousands of years we have somehow coexisted in some kind of single-state entities. The northern part of Eurasia — from Afghanistan and beyond — is a piece that for centuries has been coming to federalization, then to centralization. This region "breathes" — then it gathers, then it disintegrates. But civilizationally, this is the same array.

It is curious that the border in Ukraine runs approximately along this millennial line. Capitals just change. Now it's Moscow. Once upon a time — Karakorum, near the Caspian Sea. Then — the capital of the Golden Horde. In the Russian Empire — St. Petersburg, in the Soviet Union — Moscow again.

If you look again, it's not about nationalities. This is always a painful question.

"Why not?" Didn't they mix?

— Of course, they mixed. I'm not saying that everyone was Russian. Or at the time of the Tatar-Mongol Empire — all Tatar-Mongols. These were multinational entities. The factor of multinationality itself was not considered something exceptional.

This territory is not China, where everything is one. All Chinese. Not India. All Indians. These are Tatars, Kazakhs, Russians — a kind of multinational agglomeration. Why it happened this way is an interesting question. Maybe this is what Lev Gumilev wrote about — Eurasianism. The theory of Eurasianism is very popular in Russia. We can argue about theories, but I'm talking about facts. If we look at the borders of the Golden Horde and modern historical borders, we will see that these are, in fact, the same lines that have not changed for a thousand years.